8/6/2018
Market State 1- Bullish (19 days): Market environment is Bullish and Risk is low. Market State 1 should stay in place until the S&P 500 experiences about a 3% to 5% decline in value.
Canterbury Volatility Index (CVI 52): The Canterbury Volatility Index declined 3 points for the week. Volatility continues to be low and decreasing. Low/decreasing CVI is a Bullish characteristic. Low and decreasing volatility are primary characteristics of a low risk bull market.
Comment:
It looks like August could be the beginning of a catch-up period for underperforming Value and Dividend stocks. Value has led the market for the last couple weeks. Utilities (XLU) registered a new high for the year last Friday, Consumer Staples sector (XLP) finally broke above it’s 200 day moving average last Friday and Large-Cap Value (IVE) appears to have turned the corner by putting a series of higher highs and higher lows.
The Large-Cap International index EAFE (EFA) and Emerging Markets (EEM) made a bit of a comeback over the last couple weeks, but both remain in Bearish Security States. The Large-Cap Growth and Small-Cap Growth indexes are taking a breather, after a strong 2018. At this point, there are no major signs that they will not continue to be the leaders during the second half of the year. Treasury notes and bonds continue the be in a Bearish Market State environment.

Source: AIQ
Bottom Line:
Do not assign a risk label to an asset class. For example: Large Cap Value is safer than Small Cap Stocks or Stocks are riskier than bonds. All asset classes will eventually experience a bear market. Securities that show bear market characteristics are by definition…Risky. On the other hand, securities that show low risk Bullish characteristics, like low and decreasing volatility are safer. Small Cap Growth has been safer than Large-Cap value throughout most of the last year. Stocks in general have been safer than Treasury bonds.

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As Chief Investment Officer, Tom has more than 30 years of experience in the investment management industry and has a broad breadth of knowledge. He is known as an innovator, educator and has been revolutionary in the advancements of portfolio and risk management.